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Fine Gael TD Eoghan Murphy was at the Public Accounts Committee meeting on Thursday when the Department of Finance explained how its accounting mistake happened – and he’s gobsmacked.

WHEN THE DEPARTMENT of Finance and the NTMA were putting together the 2010 accounts they counted a loan for €3.6 billion euro twice. A simple accounting error, with a massive amount of money. Colm McCarthy says it’s not a big deal. I think that heads should roll.

Finance told the NTMA to put a new borrowing arrangement in place for the Housing Finance Agency*. Very basically, this arrangement was that the NTMA would borrow for the HFA instead of the HFA borrowing directly on the market themselves. If Finance were on the ball they would have noted to themselves at the time that there was potential here to count this figure twice at the end of the year – as borrowing on the part of the NTMA and on the part of the HFA (even though the HFA’s borrowing was already included in the NTMA’s figures). They didn’t.

But have no fear, because the NTMA lads were on the ball and in the autumn of 2010 brought this risk to Finance’s attention. About a half a dozen times with, as of yet, no documented response from Finance. Not even in a “thanks for your email, I’ll look in to it” kind of way. In Committee on Thursday, the head of Finance, Kevin Cardiff described it thus: “The significance of the matter was not appreciated at the time”.

Right. Three point six billion euro.

Unfortunately the NTMA didn’t quite get its significance either as they let it go (eventually). Only to raise it again the following March. But if the other guy isn’t listening what’s the point in talking to him?

We then move to October of this year when the penny drops and on a Friday evening two people in the NTMA and Finance have a chat on the phone. Come Monday, Finance (well at least one person in there) knows what the mistake is, where it is, and why it’s there. Well done.

Only it seems no one more senior is told until the Friday of that week. The CSO are informed, and they look in to it themselves, seeking confirmation with the HFA. Which they get on Thursday. Still no one significantly senior in Finance knows anything about this. And then a line manager is told and he reports it up the line to more senior people and, eventually, the top, Mr Cardiff.

If I was Mr Cardiff or one of his managers and I knew they’d been sitting on this all week (despite the fact that it shouldn’t have happened in the first place and despite the fact it wasn’t picked up sooner), I would be furious.

The head of Finance and his senior team were. So what do they do? They write a note to the Minister and have it delivered over to his office. No phonecall, no email, no sense of urgency or importance. And then everyone goes home for the bank holiday weekend and, as far as could be explained to the Committee, nothing is done about it until Tuesday morning.

And this is when the Minister is actually told. A full ten days after someone in Finance first realised something was up and made a call to the NTMA. Three point six billion euro.

This isn’t the Minister’s fault. It’s important to make that distinction. The Minister is responsible for policy. It is to the head of his Department that we must look when it comes to management issues and the kind of errors that occurred here.

Is the accounting error a big deal? It’s not new money, sure. But what if it went the other way and we owed €3.6 billion more than we had been telling our international partners who are currently giving us financial assistance? And what’s with the incredibly poor communications between the NTMA and Finance? And how did the immediate person responsible – the one first contacted by the NTMA – not see that a double counting of €3.6 billion was incredibly significant? And then why on discovery of the error wait a week to tell your managers?

You could tell that Cardiff and his colleagues were very angry that they hadn’t been told sooner. But then they too waited a full three days until they knew the Minister was in fact aware of the situation. The only expression that comes to mind is: What The Finance?

A double count, yes. An accounting mistake. But what of the international damage that could be done to our reputation in its revealing? Remember Greece and their ‘accounting’ problems? Where is the sense of urgency, the realisation that this IS a big deal.

This matter isn’t over. Certainly there is more correspondence to be dug out somewhere. There’s already a good idea what went wrong here and that there are two specific people involved in Finance, i.e. the ones who should have caught this billion-euro ball. Mr Cardiff is going to have an internal review done AND an external report carried out. There’s a serious glitch in the system he says. Yes, and you can bet that’s exactly what the two reports will conclude.

You say White. I say Wash. White…

*The Housing Finance Agency is a state body that provides loan finance to local authorities for housing purposes.

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